Woolworths walks away from Dick Smith

news Retail giant Woolworths today revealed plans to sell its Dick Smith chain of consumer electronics stores, following a strategic review of its broader assets finished in November 2011. It also plans to close up to 100 Dick Smith stores in the next two years.

The review, according to a statement issued by Woolworths today, concluded that Woolworths’ main strengths were primarily in “larger format, multi-channel, high-volume retail segments with market-leading positions”. In this context, the company said, “the future of the Dick Smith business, which is profitable, experiencing positive sales growth and has a strong brand position, could be better realised through new ownership.”

Woolworths said that its strategic review had concluded that the important consumer electronics category was better delivered through its Big W stores than Dick Smith, and that the investment and management attention given to Dick Smith had been “disproportionate”, relative to its position within the broader Woolworths group. “Following restructure, Dick Smith will be divested as a going concern to an appropriate buyer and will continue to operate as normal,” the company said.

Woolworths chief executive Grant O’Brien described Dick Smith as an “iconic” specialty consumer electronics brand, with a strong team and its own “leading” online presence.

“It has developed into a trusted technology retail and services hub, carrying world-leading brands and with strong market share in several key categories,” O’Brien said. “However, we believe that separating this specialty model from Woolworths is now the best option for the future of both businesses.” Woolworths has already received a number of unsolicited approached in relation to Dick Smith, which it will now explore, with the help of corporate advisory firm Greenhill Caliburn.

Woolworths claimed that Dick Smith staff, customers and suppliers didn’t need to worry about the changes, with business to continue as usual for the chain in the time being. However, it appears this statement is factually inaccurate. In the same media release, the company paradoxically stated that it would be closing up to 100 “underperforming” Dick Smith stores to be closed within the next two years, and affected staff to be offered redeployment elsewhere in the wider Woolworths group.

opinion/analysis
To me, this whole media release screams “Apple”.

In a year in which Apple’s Australian division announced record revenues, up 36 percent to $4.88 billion, and looks set to grow even more next year, Dick Smith’s Australian stores are “underperforming” and Woolworths is set to sell off the business and shut up to 100 stores. Well, I wonder what could be the problem? Where have all the customers gone? Maybe across the road to the gigantic Apple stores which have been opening everywhere around Australia over the past several years, and are known to be making record levels of revenue?

It is now a matter of public record that Australian consumers are buying less mobile phones, laptops, PCs, tablets, cameras and other devices from Dick Smith stores and are buying much of the same gear from Apple stores instead. And when they’re not buying Apple stuff, they’re going to mega-marts like JB Hi-Fi which sell the hottest stuff and lots of it, alongside 50,000 other things which Dick Smith doesn’t sell.

Sandwiched between this high (Apple) and low (JB Hi-Fi) strategy, it’s no wonder that Dick Smith is failing. A new Dick Smith store opened in my neighbourhood about six months ago, in the busiest shopping centre around. I like going in there to check out what’s on the shelves, but I always walk out, realising that there is nothing there that I actually want to buy. And usually I’m the only customer in the entire store. In contrast, whenever I walk into an Apple or JB Hi-Fi store, I have to physically stop myself from buying something. It’s like a compulsion. And there are always throngs of other customers everywhere.

Dick Smith stores remain locked in the retail paradigm which they helped establish twenty years ago. The chain has completely failed to realise that the consumer electronics market is no longer what it used to be. It has divided rapidly into high-low camps. Most of the market is now highly commodified, while a handful of companies — predominantly, Apple — have occupied the premium and are now entrenched there. And Apple certainly does not need Dick Smith.

Is the end of Dick Smith nigh? Probably not; I’m sure it will stick around for a good half-decade or more. But in the medium-term, it seems likely the brand is going the way of the dodo.

“Despite his opposition to the sale of Australian companies offshore, he said he did not see there would be any alternative. “That’s basically the only place they’ll be able to sell (Dick Smith Electronics),” he said.”

Dick Smith’s issues started at the top. Poor leadership and a business lacking direction. Look at the past few eyars and the regular changes to marketing strategies from the techxperts, to Dick will do a deal to Dick Does…(which was simply diabolical and a laughing stock).

Doesn’t Apple have about 10 stores in Australia? And are they really that popular? I don’t think that theory makes any sense when Dick Smith sold everything that Apple stores do for exactly the same price…

I don’t think you can blame Apple stores for DickSmiths woes as you point out, there just isn’t any Apple stores to speak of. (compared to DS 100+ stores)

Apple stores only stole customers for Apple products (obviously) even then only where there are Apple stores, and only where customers aren’t switched on enough to walk across the isle and check JB/dicksmith for pricing.

I actually see this as JB-HiFi causing the problem, and the fact that they are an in betweener.
They kind of wish they were a Myer – able to charge RRP – a JB Hi FI – stock only tech products – and an Apple – provide customer service.

Sad fact is, Myer sells because it has everything else.
JB-Hifi sells because it is cheap.
And Apple sells … honestly, I don’t really know why the apple stores work – I personally couldn’t buy a thing in the apple store, because it is all at ridiculous RRP pricing. I guess the “genius bar” is one thing that might draw customers.. I don’t really understand how they help sell things first-up though…

Maybe there is something else going on here as well? Dick Smith is a staunch advocate of buy Australian. He has recently been outspoken on Bright Foods takeover of long time Aussie food company Sunbeam -Angus foods. Bright foods is a Chinese government owned company, who intends to use Sunbeam to bring products from china here, and ours there.

Bright foods are also wishing to ‘merge’ with other Australian companies in the dairy and wine industries. Is it possible that Woolies, owner of Dick Smith stores,just might be in the process of pacifying the Chinese government in the hope of future business deals? By distancing itself from someone who is an advocate of buy Australian? I wonder where the real journalists are? Maybe I am seeing windmills, but if woolies has a big foot in the door with the Chinese government I would say it’s possible. At the risk of Australian producers. Just something seems fishy.

Why is this not surprising? Last time I walked into a Dick Smith store, they were selling HDMI and coax cables at somewhere between 200-300% markup over other stores… Gone are the days when you could walk in there asking highly technical questions, and get knowledgeable answers.

Someone should tell Dick Smith (the man himself!) to buy back the business and bring it back to where it used to be. A real electronics store, not just selling prepackaged consumer devices.

I have the same experience. I walk in and there is nothing to buy, plus their stock selection is awful.

I remember when they used to have those large DSE Powerhouse stores, with more competitive prices. I used to buy their $2 single albums, while JB was selling them for $4.50+. JB had to reduce prices to compete, but now even with DSE’s revamped but smaller stores, I have yet to see anything worthwhile to purchase.

Everything that Dick Smith used to be when Dickie was running the show has been taken over by Jaycar which thankfully is still going strong. The Dick Smith brand seems to have stood very still while everyone else adapted and moved on. The dodgy hard drive debacle the other month certainly didn’t help either.

The last thing we purchased from them was a cheap laptop in 2005 and before that a DVD player in 1999. Times they have a changed.

If Woolworths had of left Dick Smith’s alone as an electronics store instead of turning it into another white goods store everything would be fine. Do the math dummies white goods market saturated with retailers specialty electronic where do you go Der.

Mr Dick Smith sold out ‘his name’ when he sold the company. To come back and complain about what may happen to it is without merit, for he had placed a pricetag on the name himself.

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